Correlation Between Dividend Growth and True North

Can any of the company-specific risk be diversified away by investing in both Dividend Growth and True North at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Dividend Growth and True North into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dividend Growth Split and True North Commercial, you can compare the effects of market volatilities on Dividend Growth and True North and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Dividend Growth with a short position of True North. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dividend Growth and True North.

Diversification Opportunities for Dividend Growth and True North

0.77

Correlation Coefficient

Dividend Growth  True North

Poor diversification

The 3 months correlation between Dividend and True is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Dividend Growth Split and True North Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on True North Commercial and Dividend Growth is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Dividend Growth Split are associated (or correlated) with True North. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of True North Commercial has no effect on the direction of Dividend Growth i.e., Dividend Growth and True North go up and down completely randomly.

Pair Corralation between Dividend Growth and True North

Assuming the 90 days trading horizon Dividend Growth Split is expected to generate 0.72 times more return on investment than True North. However, Dividend Growth Split is 1.38 times less risky than True North. It trades about -0.06 of its potential returns per unit of risk. True North Commercial is currently generating about -0.24 per unit of risk. If you would invest  687.00  in Dividend Growth Split on December 4, 2024 and sell it today you would lose (39.00) from holding Dividend Growth Split or give up 5.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Dividend Growth Split  vs.  True North Commercial

Dividend Growth Split

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dividend Growth Split has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Dividend Growth is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

True North Commercial

Risk-Adjusted Performance

Very Weak

Over the last 90 days True North Commercial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Dividend Growth and True North

The main advantage of trading using opposite Dividend Growth and True North positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dividend Growth position performs unexpectedly, True North can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in True North will offset losses from the drop in True North's long position.

The idea behind Dividend Growth Split and True North Commercial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.